There was a reason the Brits never adopted the euro, they already had a strong currency used as a reserve across the globe. The pound has been a cornerstone of currency markets for centuries, there’s little reason to believe that “Brexit” is going to change its desirability. Mike Bird reports in the Wall Street Journal that currency markets aren’t changing their fundamental views of the pound in light of Brexit, and neither should you.
Following last June’s vote to leave the European Union, the pound plummeted and some analysts predicted the currency’s remaining place in the reserves of central banks would fade, mainly as the country’s giant financial services sector declined and increased volatility made it less attractive to hold.
But asset managers that work closely with central banks say they don’t believe that these massive buyers have already begun to pare back sterling holdings, or will soon do so. Most central banks with large reserves don’t independently publish their currency breakdown.
“To the extent we’ve talked to reserve managers about this, they haven’t noted any fundamental change in the way they view sterling relative to anything else,” said Gavin Ralston, head of official institutions at Schroders.
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